Word: fed
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...single trading day, Jan. 21, Hong Kong's Hang Seng index plunged 8.6%, Tokyo's Nikkei 5.7% and Mumbai's Sensex 12.9%. It was a worldwide mini-meltdown, and the Federal Reserve Board wasn't about to let that go unanswered. Before the U.S. markets had even opened, Fed Chairman Ben Bernanke--not a man known for dramatic gestures--slashed a key interest rate three-quarters of a percentage point. The surprise move arrested the rout, and the markets have since rallied, but investors are left to absorb an unavoidable truth: the U.S., still the world's biggest market...
Whatever kind of correction the U.S. is headed for, policymakers don't want it to happen all at once. The Fed's rate cuts and the roughly $145 billion stimulus plan currently being mooted by the White House and Congress are all about pumping enough demand into the economy to make the journey downhill smooth and gradual. Consumer spending used to make up about 67% of all the economic activity in the U.S., but over the past few years, it's ratcheted up to around 72%. "If we take the 5 percentage points out this year, it will...
...former chairman of the U.S. Federal Reserve Board famously described his job as "taking the punch bowl away just when the party is getting good." Current Fed chief Ben Bernanke wishes that description still applied. With stock markets reeling worldwide and recession looming in the U.S., the world's largest economy, Bernanke's Fed is frantically ladling out punch in the form of interest-rate cuts - even though almost everyone already has a brutal hangover...
...emergency rate cut on Jan. 22 shows just how anxious the Fed has become. The reduction by three-quarters of a percentage point was the deepest since October 1984. Bernanke concluded a big dose was needed, fast, to stem a virtual free fall in global stock markets. On Jan. 21 and 22, investors around the world went on a panicked selling spree that resulted in heavy losses. London's FTSE 100 index fell 5.5% on Jan. 21, while Hong Kong's Hang Seng Index fell more than 13% in two trading sessions; Mumbai's Sensex dropped more than 12% over...
...Fed's move reassured some markets. Hong Kong stocks rebounded by more than 10%. But relief may be temporary, because emerging-markets investors are finally absorbing a grim truth: the U.S. appears to be in real economic trouble. Most economists now believe the country is on the brink of its first recession since 2001, and that it could be a doozy. Forget all the talk about the "decoupling" of emerging economies, the theory that countries like China and India are no longer dependent upon U.S. trade and can continue to power strong global growth even as the U.S. staggers. "There...